Oil price and Gulf Corporation Council stock indices: New evidence from time-varying copula models |
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| Institution: | 1. Konkuk University, Department of Business Administration, 120 Neungdong-ro, Gwangjin-gu, Seoul, 05029, South Korea;2. Korea Housing & Urban Guarantee Corporation, 10F, BIFC, Munhyeongeumyungro 40, Nam-gu, Busan, 48400, South Korea;1. ESC Rennes Business School, Department of Finance and Accounting, France;2. Kent Business School, University of Kent, UK;1. School of Economic and Management, Xi''an University of Technology, Xi''an, Shaanxi, China;2. Shih Chien University Kaohsiung Campus, Kaohsiung, Taiwan |
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| Abstract: | Using a time-varying GJR copula approach, we determine the conditional dependence of the GCC stock indices on oil price between 2007 and 2016. We show how to improve the forecasting accuracy of the co-movement of energy and stock prices in an equally weighted portfolio. Contrary to prior findings, we demonstrate that due to the different co-movements across the GCC stock indices, portfolios of oil assets and several GCC stocks are less likely to be affected by systemic risk. The different co-movements across several stock indices over time provide different entry and exit points for stock investors. This approach is in line with the ‘buy low/sell high’ adage. |
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| Keywords: | Crude oil prices Copulas Tail dependence Co-movement C1 C6 E3 G1 |
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